What is meant by forfeiture of shares and explain its accounting treatment?

Forfeiture of Shares. Forfeiture of share means the cancellation of the shares for non-payment of calls due. … If any shareholder is not able to pay the amount of call, the company may exercise the power to forfeit his shares on which he is unable to pay the amount of call.

What is meant by forfeiture of shares?

What Is a Forfeited Share? … When a share is forfeited, the shareholder no longer owes any remaining balance and surrenders any potential capital gain on the shares, which automatically revert back to the ownership of the issuing company.

What is the treatment of forfeiture account?

Accounting Treatment for Forfeiture

The balance in the Share Forfeiture A/c is shown under the Share Capital on the liabilities side of the balance sheet. This account will remain till the said shares forfeited are reissued by the company.

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What is meant by forfeiture in accounting?

Forfeiture, under the terms of a contract, refers to the requirement by the defaulting party to give up ownership of an asset, or cash flows from an asset, as compensation for the resulting losses to the other party. … The process of forfeiture often involves proceedings in a court of law.

What is meant by forfeiture of shares explain the accounting treatment of forfeiture of shares and their reissue?

Forfeiture of shares refers to the cancelation of shares. Sometimes, shareholders may be unable to pay the money due on allotment or calls on the due date. … It also forfeits the money received on forfeited shares till the date of forfeiture. Consequently, the Company may opt for Reissue of Shares.

What are the effects of forfeiture of shares?

The liability of a person whose shares have been forfeited comes to an end when the company receives the payment in full of all such money in respect of shares forfeited. – A member is liable for unpaid calls even after the forfeiture of shares.

What is the procedure of forfeiture of shares?

Forfeiture of shares is a process where the company forfeits the shares of a member or shareholder who fails to pay the call on shares or instalments of the issue price of his shares within a certain period of time after they fall due.

How do I share my forfeiture account?

The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares. It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.

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Where is share forfeiture in balance sheet?

The share forfeited A/c is shown in the liabilities side in Balance Sheet under the heading ‘share capital’. It is added to paid up capital until all the forfeited shares are not re-issued.

What is the difference between seizure and forfeiture?

Seizure is the act of taking property. … Forfeiture occurs when your rights to the seized property are permanently lost through a court order or judgment. Forfeiture occurs after seizure, and seizure does not always end in forfeiture. In our example, the seizure takes place when Officer Potts takes the money from Steve.

What is meant by forfeiting?

Forfeit means to lose or give up something, usually as a penalty. … An adjective, noun, and verb all rolled into one, forfeit came into existence around 1300 meaning “to lose by misconduct.” To forfeit is to lose or give up something as punishment for making an error. A forfeit is what is lost.

What are forfeiture proceedings?

The process of forfeiture often involves proceedings in the court of law. Civil proceedings occur when the action is against property, as opposed to a person. … If the defendant is found guilty during criminal proceedings, criminal forfeiture allows for their property, money or substitute assets to be confiscated.

What do you mean by re issue of share?

Reissue of shares simply means issue of share again. Due to numerous reasons a company may forfeit shares of their shareholders. Most common case is due to default in installments such as allotment money or calls. These forfeited are thus supposed to be reissued.

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What is the minimum price at which a company can reissue its forfeited shares?

Amount equal to the unpaid amount on the forfeited shares/calls-in-arrears.

What is the nature of share forfeiture account?

A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

Capital